“In modern times, debt has become a key means of capital accumulation. Ubiquitous, it has taken on a new function, as the most general category through which exploitation is organized”

Silvia Federici

The 2008 crisis burst and debt rang our doorbell. Spain, together with Greece, Portugal and Ireland, among other “developed” countries, fell into the debt trap. Not only the country, but its people suffered from the dispossession processes that the debt system imposes. We lost, as the peoples of the global south had before us, our right to decide, democratically, how they want to produce, distribute and use the resources we all need to guarantee the reproduction of life. In order to recover that right, we, debt activists since 2000, joined forces with the 15M indignados, and started the Citizens Debt Audit Platform (PACD) in 2011. Since 2011, PACD has tried to focus the social movements agenda on the debt issue, not only state public debt, but also municipal and regional debt.

Debt is, and has historically been, a tool for domination and plundering of resources. I discovered debt as a tool for undermining national sovereignty in 2000, when I first joined a campaign promoting a popular referendum on the cancellation of impoverished countries’ debt owed to Spanish institutions. At that point, the anti-globalization movement was just starting, and we managed to gather more than 1 million people around Spain in front of ballot boxes to vote against debt. After that came the Debt Observatory and the “Who owes whom?” network, both of which questioned the legitimacy of financial debt and demanded the recognition of social and ecological debts that the Global North owed to the Global South. We joined forces with our colleagues in the Global South, at the World Social Forums, the international campaign on illegitimate debts, and the South North platform on Sovereign, Democratic and Responsible Financing. As the analysis by Jane Somers states “the south/north relationship within transnational debt campaigning was a dynamic one, driven by the continual interaction of solidarity and conflict, as campaigns struggled to resolve the power inequalities, which are reflected back into transnational civil society from a hierarchical world order.” In those relationships, we tried to listen and learn from our colleagues in Jubilee South, and found ourselves having to lobby the European and North American debt campaigners on the recognition of debt illegitimacy and the existence of social, ecological and historical debts.

At PACD we understood then (and understand now) that much of the debt in Spain has been generated illegitimately. Therefore, we demand the right to know: to know the details of the process that led us to this situation. The way to learn about this is the Citizen Debt Audit, an audit that could allow us to demonstrate the illegitimacy of this debt, but also to organize and gather forces around the radical idea that “not all debts should be paid. ” We joined efforts with other European colleagues on the fight against debt and austerity, and for the implementation of Citizen Debt Audits, around the International Citizen Audits Network (ICAN).

A few years later, some of our colleagues from PACD took a step towards mainstream political institutions and many gained positions in various municipal governments as part of a broader wave of efforts that have been called “municipalism.” This inspired us to set up then the Municipal Network against debt and austerity, where activists, political groups, and municipal officials, get together to try and reverse the debt system that also threatened our local institutions and the new municipalist hopes.

Throughout all these years of activism against debt, I have learned that debt is one of the most efficient tools that capitalism uses to undermine our fundamental rights. Debt has become one of the most powerful devices for domination and dispossession, without needing to sustain a costly empire.

Lever of dispossession

Throughout history debt has been a tool not only for transferring monetary resources from the popular class to the economic and political elites, but also for extracting natural resources and undermining sovereignty. Traditionally, when public debt levels get to a point of “unsustainability,” when the public resources are not enough to pay the debt and its interest, creditors and international financial institutions use the occasion to impose draconian policies in the interests of the lenders.

In the late 80s and 90s we called these policies structural adjustment programs; today we call them austerity measures. Technically, this is referred to as conditionality. This conditionality defines not just the framework for the terms on which the credit should be repaid, but it also includes actions to be taken in all kinds of sectors: from macroeconomic to social or environmental policies. Many scholars and activists have come to the conclusion that conditionality can severely undermine sovereignty, democratic decision-making and ownership for policies in countries worldwide.

“Conditionality” usually includes economic policy conditions that, in theory, are designed to increase the debtor’s capacity for future payments, including public sector spending cuts, restrictions on the hiring of public servants, limitations to public sector salaries and pensions. These conditions also aim to “stimulate” the economy in the private sector by deregulating labor markets, liberalizing trade and finance, privatizing public services, and selling public assets. In some cases, these conditions even demand changes to a nation’s constitution, as was the case in Spain.

In 2012 the Spanish Government and the main opposition political party, following the “suggestion” of the ECB (European central bank) president, and willing to satisfy and send a positive message to the financial markets, introduced a change in the Spanish Constitution. The “infamous” article 135 of our constitution guarantees the payment of public debt and its interests to creditors before making any other public expense or investment. The priority of debt payment is now constitutionally guaranteed in Spain. Measures similar to these have been imposed before to other countries by International Financial Institutions and their creditors. The Philippines introduced constitutional changes in the past, also ensuring debt repayments, following the creditors indications. And most recently, Brazil introduced in 2016 constitutional amendments with the support of the IMF, capping public spending for 20 years in what has been characterized as “the mother of all austerity plans.”

These conditionality policies may include also a further exploitation of natural resources. We can find a recent example in Greece, where the “rescue” loans conditions included the obligation for the Greek government to allow the private exploitation of gold mines in the natural protected area of Skouries.

According to a recent report from the European Network on Debt and Development (EURODAD) “the type of reforms that the IMF imposes through program conditionality affect governments’ ability to provide public services, their capacity to fulfill their human rights obligations towards citizens, and ultimately impacts on people’s living conditions.” This report has provided evidence that the number of IMF conditions imposed on “peripheral” nations in the EU are actually increasing, in contrast to IMF rhetoric claiming that conditionality is being streamlined.

The beneficiaries of these conditions are institutional creditors and an economic elite that can make profit through acquisitions of privatized public assets at a very low prices, through managing privatized public services, through reduced labor costs, through the exploitation of previously protected natural resources, and through the collecting interest on the debts.

In the shameful story of Greece, the European Central Bank (ECB) and Germany turned out to have been major beneficiaries of the debt crisis that devastated the people of the country. The ECB made €7.8bn net profits from interest on Greek debt between 2012 and 2016. Germany earned a total of €2.9bn in interest between 2010 and 2017. The Jubilee Debt Campaign estimated, in 2015, the IMF had made €2.5bn in profits from its loans to the country. According to an interim report by the Greek Debt Audit Truth Commission, more than 90% of the loans given to Greece since the financial crisis ended up simply paying back private banks and public creditors outside Greece, mostly in Europe. Greece had to apply a dreadful set of austerity measures that increased poverty and inequality in the country to unprecedented levels, in order to rescue some European banks and the elites who own them.

In many cases, bankers and investors buy risky debt bonds with a high interest rate (that is high precisely because of the risk involved), but when the risk becomes real, they reach to the State for rescuing. In Greece, for example, the flow of lending continued even after the subprime crisis started in the US. European banks used the money that was being lent by the ECB at a very low cost to buy Greek debt, which was offered at very high interest rates. As Sankara said in 1986 “those who led us into debt were gambling, as if they were in a casino.. there is talk of a crisis. No. They gambled. They lost…” But the losses are not accepted by the financial sector. Losses are socialized, while benefits always stay private.

The next debt crisis

The “debt problem” is not either in the past nor in the European “periphery.” It is a ticking bomb that is about to explode. As many financial analysts and international financial institutions recognize, the question is not whether there will be a next debt crisis, but where and when it will be triggered.

Global debt levels have never been so high, especially in the so-called emerging countries like Argentina, Turkey and particularly China. Analysts are not only worried about public debts but also private and corporate debts. Private and public debt in impoverished countries are also growing at unprecedented levels. Some of this debt is backed by natural resources such as oil through what is called collateralized lending, which means that if/when there’s a debt default, resources pass on to the hands of creditors, often multinational corporations.

The individual and family debt that derives from the insufficiency of salaries to cover housing, education or medical expenses, do not worry most official analysts. With the financial crisis in 2008 came a tide of mortgage defaults in Spain and many other countries. Thousands have lost and are still losing their houses due to that crisis. Migrants, poor workers, women, are amongst the most affected by this crisis. But, in response, many inspiring movements have emerged, including, in Spain, a multi-nodal organization known as la PAH, whose name means “platform of people affected by mortgages.” La PAH is a grassroots organization that mobilizes people to defend one another from foreclosure and take direct action against banks, vulture and investment funds.

Groups like the PAH are struggling against a process that Silvia Federici calls the “financialization of reproduction”: a new debt economy based on new forms of individual debt that have proliferated with the neoliberal turn: students’ loans, medical debt, mortgages, credit card debt and micro-finance debt. Whereas once the primary axis of economic exploitation was the labor-capital relation mediated by the wage, today credit and debt become major forms of power and extraction. There are even those who speak of the “right to credit,” that is, of the idea of normalizing a system of debt as a means to lift people out of poverty. Federici writes that “this individual and group debt not only amplifies the economic effects of state-debt, but change the relation between capital and labor and between workers themselves.”

As mentioned, personal or family debts do not worry the global financial analysts. But if/when another global debt crisis explodes, these everyday debts will again become the last rung of the ladder, the extractive politics of debt and their consequences will come back to our doorstep. Personal debt, as sovereign debt, is a tool for dispossession. As Naomi Klein has shown in The Shock Doctrine, debt, especially in a moment of evident crisis, is an efficient instrument for discipline against the working class. The debt insists: Do not quit your precarious job, do not complaint of your insufficient salary, do not protest … or you won’t be able to pay. In the same way that it restricts the ability of a government to decide its policies, it restricts the capacity of a person or family to shape their future. As Federici states, “the lending/debt machine becomes the dominant work relation, exploitation is more individualized and guilt producing.”

Instruct, agitate, organize against debt

In 1986 Thomas Sankara explained how those who were lending money to African countries then were the same who colonized Africa before. He said: “Debt is neo-colonialism, in which colonizers transformed themselves into ‘technical assistants’. We should better say ‘technical assassins.’” Old forms of debt and dispossession are still in place, while new forms and degrees of indebtedness and dispossession have also appeared. Financialized capitalism has globalized the debt system. While the specifics of how the debt crisis affects Spain, the USA, Argentina or Mozambique are different, the system and structure behind those crises are the same. Debt is therefore no longer just an issue for poor countries, but also for poor people all around the world.

The dictatorship of financial markets and financial institutions, what we call debtocracy, prioritizes debt repayment that will benefit the wealthy over and above any basic rights. So in order to defend human rights we do need to address, globally and collectively, this debt system. If debtocracy is a global systemic problem, strategies to fight it need to be global and systemic.

For this, it is essential that we look back and around, and learn from the experience of all countries that have gone through and continue to go through debt crisis. Only by analyzing the problem globally, and our diverse popular responses to it, can we build new and better responses. It is essential to rebuild the international networks that allow us to fight the debt system jointly and internationally. The new digital era that we live in presents incredible opportunities to do so. As Gramsci said, we must “educate ourselves because we’ll need all your intelligence. Stir ourselves because we’ll need all your enthusiasm. Organize ourselves because we’ll need all your strength”. Let’s use the possibilities of the digital today to do so against debtocracy and austericide : instruct, agitate and organize.

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